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Ways to trim college costs

Here's a new twist on an old saying. There are three things in life that are certain: death, taxes and college costs that go up every year, even during a recession. How can students and parents avoid the "extreme borrowing" phenomenon that can lead to years of burdensome loan payments? They can start by looking for ways to trim college costs so they won't have to borrow and/or pay as much in the first place. Here are some ideas.

Pick a college with a lower sticker price

Pricey private colleges often like to point out that the majority of their students don't pay the full "sticker price." The problem is, you never quite know how much, exactly, their students are paying. Every student's aid package is different, and the presence of merit aid awards makes the picture even murkier. Private colleges with the biggest endowments can afford to be the most generous (replacing loans with grants in aid packages, for example, or guaranteeing merit aid for all four years), but not every private college can do this. Even if a college takes $15,000 or $20,000 off its sticker price, that may still leave $30,000 or more to pay each year.

In the past few years, enrollment at public colleges has soared due to their lower sticker prices—public colleges are typically half the cost of private colleges and, for in-state residents, the savings can be even greater. Education experts often debate the benefits of spending more money to attend a well-known, more prestigious private college vs. a public college. But it's generally agreed that motivated, bright students can succeed anywhere, and that after a certain period of time, job experience matters more than where you went to college.

Consider taking a year off

The number of students taking time off between high school and college is growing in a measurable way. This period, commonly referred to as a "gap year," is typically spent volunteering, traveling, working and/or interning. One of the main benefits of a gap year is the increased maturity and focus that comes from engaging in new experiences. These traits can help students get their money's worth in college by sharpening study habits and career goals. Another benefit is the potential to earn money to pay for college. For example, working full-time for 42 weeks (10 months) at the federal minimum wage of $7.25 per hour equals about $12,180 before taxes. Or, for the volunteer-minded, the AmeriCorps program currently provides a modest living allowance and a stipend in 2010 of $5,350 in exchange for service work (future stipends will be tied to the maximum federal Pell Grant). And more than 80 colleges now offer matching grants to students who earn an AmeriCorps stipend (see www.americorps.gov for more information).

Tweak the typical four-year experience

If your child doesn't mind forgoing the typical four-year college experience, here are some ways to trim costs:

Attend a community college for one or two years, then transfer to a four-year institution

Take AP high school courses to earn college credit and reduce the time in college

Look at colleges that offer three-year accelerated degree programs

Consider living at home and commuting to school to save on room-and-board costs

Research scholarships

After your child fills out the federal government's financial aid application (the FAFSA) and the college's financial aid application (the standard PROFILE application or the college's own form), he or she should set aside as much time as possible to research and apply for scholarships. With online searches, students can easily input their talents and background and get a filtered list of relevant scholarships (try http://www.fastweb.com/ or http://www.collegeboard.org/). Also, don't forget to check with your employer and the local chamber of commerce for scholarships.

Budget well during college

Encourage your child to look for deals on mandatory items like books, supplies and other personal dorm room items. For discretionary items, establish guidelines for a reasonable amount of monthly spending money, but build in flexibility. If you do co-sign a credit card application with your child (a co-signer is now required in most cases for applicants under 21), make sure your child doesn't succumb to the temptation of easy money. According to a study last year by Sallie Mae, the average college student has $3,200 in credit card debt. Discuss your expectations of credit card usage and make sure your child understands how interest accumulates on unpaid monthly balances.